Most 401(k) Plan Fees Declining or Flat

According to the 14th edition of the 401k Averages Book, the average total plan cost for a small retirement plan (50 participants and $2,500,000 assets) declined from 1.46% to 1.44%, while the average total plan cost for a large retirement plan (1,000 participants and $50,000,000 assets) remained flat at 1.03%.

“In most of our fee benchmark scenarios, we saw a decline in total plan costs and investment fees on a year-over-year basis,” says David Huntley, co-author of the book, who is based in Baltimore. Research shows the small plan average investment expense went from 1.37% to 1.35%, while the large plan average investment expense bumped up from 1% to 1.01%. “In cases where it stayed flat or ticked up, the increase in equity exposure in our allocation model was typically the reason,” says Huntley.

“The effects of fee disclosure and competitive pricing narrowed the range of the middle 50% of the product universe for most of the benchmark universes,” says Joseph Valletta, another co-author of the book. “The small retirement plan universe saw the range of the middle 50% shrink from 36 basis points last year to 29 basis points this year, while the large plan variance went from 21 basis points to 20 basis points.”

Valletta adds, “With so many small employers either sponsoring or starting 401(k) plans, we also released a new set of benchmarks for plans with 10 participants (also known as micro plans). One benchmark assumes plan assets of $500,000 while the other is $100,000.” The research finds the average total plan expense for a 10-participant plan with $500,000 in assets is 1.90%.

The 401k Averages Book is a resource for non-biased, comparative 401(k) average cost information, designed for financial professionals and plan sponsors. More information can be found at http://www.401ksource.com.